Estimating Spatial Consumer Price Indices Through Engel Curve Analysis

Abstract

In this paper we propose a method of estimating spatial multilateral price index numbers from cross-section consumer expenditure data on different items using Engel curve analysis. The novelty of the procedure is that it overcomes the problem of data inadequacy, a problem that is shared by most of the developing countries. The procedure does not require item-specific price/unit value data and price index numbers can be calculated from consumer expenditure data grouped by per capita income/total consumer expenditure class in a situation where unit level data are not available. To illustrate the method, we use published state-specific data of the 50th round (1993-94) and 55th round (1999-2000) consumer expenditure surveys of India's National Sample Survey Organization (NSSO) and calculate the spatial consumer price index numbers for 15 major states of India, with All-India taken as base, separately for the rural and the urban sector for each round.